KUWAIT: Kuwait’s outgoing Cabinet yesterday approved a $5.2 billion economic stimulus package to spur lending and beef up financial firms after weeks of delays because of a standoff with Parliament.
Kuwait, which is one of the world’s biggest oil exporters, has been hit badly by the financial crisis and is the only Gulf country that has had to step in to save a big bank. The plan is designed to enable banks to lend about 4 billion dinars ($13.81 billion) within two years of which the government would guarantee up to 50 percent to encourage lending. The total cost of the package should not exceed 1.5 billion dinars, the central bank has said.
The government can also help banks trying to raise fresh funds by buying any unsubscribed stock in capital increases as it did with troubled Gulf Bank in January.
“It took longer than it should, but it’s an extra bonus for those who already started their restructuring,” said Bader Al-Sumait, the chief of Kuwaiti investment firm Global Investment House (Global). “I can get extra resources, better terms.”
In December, Global, a regional powerhouse led by Chairwoman Maha Al-Ghunaim, appointed HSBC as an adviser to restructure about $3.1 billion in debts with local and global banks.
Investment firms, which make up more than half of all listed firms on the Kuwaiti bourse, had been appealing to the government to approve the stimulus package, which had been stalled in Parliament for weeks.
Kuwait’s ruler cleared the way for the bill to pass by decree when he dissolved Parliament and called elections last week. The move enables the outgoing Cabinet to go ahead with urgent bills without approval from Parliament.
The next Parliament would then be asked to approve the bill after elections expected in May.
State news agency KUNA quoted Finance Minister Mustapha Al-Shamali as saying guidelines for the bill’s implementation would be issued within three weeks.
Analysts say it is crucial for the government to start delivering on its promises as soon as possible.
The package also aims to protect companies from creditors if they file a viable business plan and the central bank approves the advisers for any foreign financial restructuring, Al-Sumait said in an interview. “Sometimes they worry about the quality of the adviser,” said Al-Sumait, who wore a button reading “I am up to the challenge” on his traditional robe.
Budget passed
The outgoing Cabinet also approved yesterday the 2009/2010 state budget which projects a sharp drop in revenues and a four-billion-dinar ($13.8-billion) deficit, Al-Shamali, the finance minister, told KUNA.
Revenues are projected at 8.1 billion dinars ($27.9 billion), down 36 percent from $43.8 billion of budgeted income in the current fiscal year, he said. Projected spending is slashed by a massive 36.2 percent to 12.1 billion dinars ($41.7 billion) from $65.4 billion in this fiscal year’s budget.